Bitcoin appears to be forming a bearish continuation flag pattern on its short-term chart, and the longer-term view shows how low it might go. It can be seen that the next area of interest is just above the $4,000 mark then at $3,025.
The 100 SMA is below the longer-term 200 SMA on this daily time frame to confirm that the path of least resistance is to the downside. In other words, the selloff is more likely to resume than to reverse. The 100 SMA dynamic inflection point is also nearing the broken support around $6,200 to add to its strength as resistance on a pullback.
Stochastic is heading lower and has a bit of ground to cover before indicating oversold conditions. At this point, sellers might be exhausted enough to allow buyers to take over. And if bulls are strong enough, they could push for a move past the area of interest and onto the next potential ceiling at the 200 SMA dynamic inflection point.
Bitcoin suffered a sharp drop last week, along with most of the cryptocurrency industry, on account of the uncertainty surrounding the Bitcoin Cash hard fork. This has reminded market watchers that similar problems could also arise for other altcoins, particularly those dependent on the mining community and its consensus.
Still, many are pointing to the relatively stable start to the week as a sign that bulls continue to defend the lows and might be enough to keep further declines in check. Several analysts are still holding on to bullish forecasts for the year, although some have pointed out that it could now take months to undo the latest slide.
Although there are institutional inflows to be expected next year, the recent drop could be discouraging for volumes. With that, the rebound in Bitcoin could be much slower than expected and larger dips may be possible before rallies occur.
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